Are you eligible to utilize the downsizer contributions in your superannuation?

In the 2017-18 Budget a measure was announced allowing contributions from the proceeds of downsizing, as part of the governments package of reforms to reduce the pressure on housing affordability.

The background behind the downsizer measure

As of 1 July 2018, individuals who are 65 or older who meet eligibility requirements, may be able to choose to make a downsizer contribution into their superannuation fund of up to $300,000 from the proceeds of selling their home.

The downsizer contribution will form part of the individuals non-concessional contribution but will not count towards their contribution cap and can be made even if the individual has a total super balance greater than $1.6 million. The contribution will not affect your total super balance until your super balance is re-calculated to include all contributions at the end of the financial year.

This type of contribution can only be accessed once, with a maximum contribution of $300,000 (each). The contribution cannot be greater than the total proceeds of the sale of your home.

Are you eligible for the downsizer contribution?

You are 65 or older at the time you make the downsizer contribution
The amount you are contributing is from the proceeds of your house sale on or after 1 July 2018
You home was owned by you or your spouse for 10 years or more prior to the sale
Your home is in Australia and is not a caravan houseboat or other mobile home
The proceeds from the sale of the home are either exempt or partially exempt from capital gains tax (CGT) under the main residence exemption
Your downsizer contribution needs to be made within 90 days of receiving the proceeds of the sale, which is usually the date of settlement.
You have not previously made a downsizer contribution to your super from the sale of another home.

Now you’re eligible, how to get the money into your fund…

Eligible individuals are able to make multiple downsizer contributions from the proceeds of a single sale. You just need to ensure the total of all contributions do not exceed $300,000(each, if a couple) or the total proceeds of the sale.

Do you extra time to make the contribution?

If you find there is a delay but factors outside of your control, you may be able to request a longer period of time to make the downsizer contribution. The extension of time should be requested before the 90 days from settlement.

Some examples of time extensions being granted include but are not limited to ill health, death in the family and moving house.

Don’t forget your reporting requirements

If you are eligible to make a downsizer contribution, you will need to complete the Downsizer contribution into super (NAT 75073) form. This form needs to be provided to your super fund when making the contribution. If multiple contributions to different super funds are made, you are required to provide a form for each contribution.

As downsizer contributions are a relatively new type of contribution, trustees need to ensure the SMSF deeds have express wording that covers this contribution. Especially as the legislation prior, had not contemplated the flexibility of these contributions.

Is it worth making a downsizer contribution?

The downsizer contribution is a way to top up your super balance, allowing older Australia’s who have not had the chance to save enough funds for retirement to make a tax-free contribution into their fund.

The usual restrictions, listed below do not apply to this contribution;